Futures Trading Blog

Lisa asked:


I want to start as a commodity trader. I need futures and trading recommendations to have stable steps. Where can I get advices on futures trading commodities?

BOECK

renaepro asked:

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GILDEN

Larry Haywood asked:


In the world of finances, futures and options are classed as “derivatives”. They are financial instruments whose prices are calculated by the price of another underlying asset or security. Generally, futures and options are used to guard against risk and for speculative roles. Whenever an investor from Europe purchases shares of an American company on the NYSE, for instance, he is exposed to some stock price fluctuations and currency exchange rate risks. To minimize his overall degree of risk, the investor can purchase currency options to make certain the exchange rate is fixed when he sells off the stock and converts the American dollars back into euros. We will now take a better look at how futures and options work.

Futures

A future is merely an agreement to purchase or sell an asset for a preset price at a specified date in the future. A future’s fundamental asset can be, amongst a lot of other things, an agricultural commodity, individual shares, stock market indices, bonds, and interest rates. A future contract will have fixed delivery dates, traded units, and other clearly defined terms and conditions.

For illustrative purposes, let’s imagine that you’ll “open” a futures position by either purchasing or trading an equity futures contract where the underlying asset are shares. Whenever you’re anticipating the price of the stock to go upwards in the near future, you will purchase a futures contract that will oblige you to receive a specified number of shares at a preset price on a certain date in the future. This is known as a long futures position. If, on the other hand, you’re anticipating the price of the stock to go downwards in the near future, you’ll sell a futures contract that will oblige you to deliver a specified number of shares at a preset price on a certain date in the future. This is known as a short futures position.

Like any other kind of investment, futures contracts carry a risk - that market prices may not go in the direction you thought they would. Nevertheless, they enable you to profit both in a rising and a descending market. When you invest in shares, you typically profit from purchasing low and selling high. But with a short futures position, you can still make money even if the stock price drops.

Options

An option gives its holder the right to purchase (call option) or sell (put option) an underlying asset at a planned price before or on a particular date in the future. But unlike a futures contract, the holder of an option is not obligated to take any action. If the holder decides not to exercise the option, all he stands to lose is the premium he gave for it.

Imagine you currently have a number of shares of a specified company’s stock and you plan on selling them in a month. If you anticipate the share price to drop in this one-month time period, you could purchase a put option that will give you the right to sell your shares at a preset price at any time within the next thirty days.

Whenever your expectations turn out to be right, you’ll be able to sell your shares at a price that is more than the market value.

Options could be utilized as an insurance mechanism against future dips in the price of an underlying asset. The purchasing of options arrives with limited risk as the holder of the option only stands to lose the option premium if his anticipations of market movements do not happen. Additionally, they allow you to take part in market price movements without actually having to take on the underlying asset.

Hopefully, this brief article has served to shed some light on what futures and options are and how they function. The examples preceding were very simplified and were only meant to show the basic concepts of derivative trading. In reality, trading with derivatives is a good deal more complex and warrants additional reading. You need to be extremely acquainted with the different types of products to be successful and fruitful in your positions.



GUFFEY

IraEpsteinFutures asked:

Futures Trading, Online Trading, Stock Indexes Review, Sales: 800-284-3010

MCCULLER

IraEpsteinFutures asked:

Futures Trading, Online Trading, Metals Review, Sales: 800-284-3010

WOLFROM

beeforsalmon asked:


For something like an Interest rates future, does the volume traded and volatility of the future decrease as it gets to the expiration date. For equity futures, volatility and volume increase but for something like interest rates, unless there is a major shock, would traders be more concerned with taking a view on futures in a year or 6 months than trading on one with a week to expiration. Thanks for the help

CATERINA

Miss Yahoo asked:


A. There are no specialists on futures exchanges.
B. All futures contracts are eligible for margin trading.
C. Trading is halted for the day if the prices reach the daily limit.
D. The uptick rule applies to the shorting of futures contracts.

VIARS

americanjoe1776 asked:


The CFTC reports a weekly Commitment of Traders report for commodity futures. They split the commitment between non-commercial and commercial. Is non-commercial individual investors? Is commercial investment banks and funds?

KHAMVONGSA

John K asked:


Is the sole purpose of proprietary trading desks trading equities and futures and performing arbitrages based soley on profits which can be achieved better by a group of traders using firm’s money. How do these firms attract money and from particular who ? Corporations hedging their positions in commodity or currency ?

What is the cost and regulation to start a prop desk?

What would be a requirement for you to join a prop desk in Canada ?

VIRAMONTES

i.have.questions asked:


Has (Does?) options-trading (futures) affected the stock market? Is there any positive or negative impact of trading options directly or indirectly on the trading of stocks?

Not that I’m not trying to understand what is options trading - I am trying to find out if there has been any study on the impact of futures trading on a stock market on a general scale.

STIMAGE